AIG's $23B unsolicited bid for American General takes on Prudential bid

NEW YORK (CNNfn) - U.S. insurer AIG on Tuesday made an unsolicited $23 billion bid to acquire financial services firm American General, which has already agreed to be acquired by British insurer Prudential.

AIG's (AIG: Research, Estimates) bid values American General at $46 per share, a 25 percent premium, with a collar added to the deal. AIG said it would offer 0.5462 to 0.6037 of its own shares for each share of American General in the proposed all-stock deal.

But Prudential's stock has dropped sharply since the announcement and its offer now values American at just $39.76 per share, or $20 billion overall, based on Tuesday's closing prices.

AIG Chairman and CEO M.R. Greenberg said in a statement he hopes to commence merger discussions in the "very near future."

Said Greenberg, "We believe that the combination of our two companies is uniquely attractive, in terms of mix of businesses and distribution channels, and would be highly beneficial financially to both of our shareholder groups."

Greenberg added in a letter to American General Chairman Robert M. Devlin, AIG decided to step in after the steep price drop in Prudential stock and said its offer provides "demonstrably superior value."

American General did not immediately return calls seeking comment.

Prudential spokeswoman Geraldine Davies said Prudential had seen the announcement. "We note that our merger agreement with American General remains in full force and effect," she said.

She declined to comment further.

But at least one large American General shareholder said the AIG offer was far more attractive, particularly because it offered shares of a U.S.-listed company.

"They'd better do it, that's all I can say," said the shareholder, who asked not to named. "It's domestic stock, it's AIG stock, the terms have to be just as good to (American General Chairman Robert) Devlin and the deal can close faster."

Shares of American General rose $6.20 to $43 in after-hours trading on Instinet.